Liquid Money: M1

• The most liquid form of money is what is called M1. M1 is money that can be immediately spent. It can be used to buy goods without any intermediate steps or transactions necessary.

• The currency and coins that are in your pocket or wallet (or even down between the cushions of your sofa!), are definitely M1. They can be spent immediately (and often are in my case, unfortunately)> .

• But there’s more to M1, than just currency and coins. The money you put in the bank in your checking account is also M1. After all, you could go buy something and simply write a check. Traveler’s checks and money orders are also considered M1.

• The quantity of M1 in circulation in an economy is called it’s money supply.